Time Series Analysis of Transatlantic Market Interactions: Evidence from Crude Oil and Gasoline Prices
This paper investigates the interactions of spot markets for crude oil and regular gasoline in a transatlantic context. A cointegrated vector autoregressive (VAR) system is estimated using weekly time series data for spot prices of representative crude oil and regular gasoline in Europe and the US. The cointegrated VAR analysis shows that the US crude oil plays the role of long-run price leadership, influencing the price determination of the other commodities in the VAR system. Cointegrating vectors are then normalized and restricted so that the underlying long-run market interactions may be interpreted in terms of causal chains. Finally, a parsimonious equilibrium correction system is estimated in order to reveal the short-run market interactions.
Volume (Year): 9 (2010)
Issue (Month): 2 (August)
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- Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679. Full references (including those not matched with items on IDEAS)
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